Hungrier Investors, Loosened Regulations Could Spur More Local IPOs

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rise in behind-the-scenes filing activity and ongoing strength in the overall equity markets,” Renaissance Capital said in its forecast for the second quarter.

In just the past four weeks, 27 companies have filed for IPOs, the largest four-week total since the summer of 2011, according to Renaissance.

Many of those companies are taking advantage of a JOBS Act provision that allows them to file draft versions of their S-1 registration statements confidentially. If companies find interest in their stock is lower than anticipated, they can withdraw without publicly damaging their image.

Rally filed confidentially, which smoothed the process, Miller said.

“That was really nice. My understanding is the vast majority of companies are doing that. As a result of being able to file confidentially, it was a pretty orderly process. There were no real surprises.”

Return Path is not planning on going public soon, Blumberg said, but its executives are expecting to make use of the new rules for emerging growth companies if and when they do.

“There are a couple of provisions we’ll take advantage of,” Blumberg said. “I do think we’ll take advantage of the confidential filing when we get there.”

The act also does away with other provisions that have deterred companies from going public, Blumberg said.

Emerging growth companies only have to file two years of audited financial records with the SEC when they begin the IPO process, instead of three. There also is a five-year “on ramp” period when companies do not have to comply with parts of the Sarbanes-Oxley Act, such as needing an auditor to attest to their internal financial controls.

Going through an IPO can cost $1 million to $2 million. Complying with provisions of Sarbanes-Oxley and other regulations typically cost between $1 million and $3 million annually, according to Blumberg.

“Adding an expense like that is a real big deal,” he said.

One year after its passage, the JOBS Act has changed how companies plan and made going public less burdensome. Still, it doesn’t change the ultimate dilemma companies have to face when they take the leap.

“It makes [going public] easier, it makes it less risky and costly, but you have to be ready to run a public company,” Blumberg said.


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